December 22, 2009

US Wheat Outlook on Tuesday: Mixed amid low volume

Traders are expecting a mixed open for U.S. wheat futures following quiet overnight trade and a lack of fundamental news.

In overnight trade, March CBOT wheat was down 1 1/4 cents to US$5.18 1/4 per bushel and July wheat was flat at US$5.44 1/4.

The market traded in a very tight range overnight, but it has the potential to move suddenly due to the low-volume holiday trade that is expected to continue into next week, analysts said.

A trader said prices are prone to move a nickel at a time in such an environment, and traders could get "chopped up to pieces here." But a sustained move is unlikely, traders said, particularly in the absence of any strong outside market influence.

The market has little supportive fundamental news. Traders say a large winter storm bearing down on the U.S. Midwest should not be a problem for the crop, and note there are few crop issues elsewhere in the world.

"More quiet choppy trade with a negative bias for the rest of the week seems likely," Benson Quinn Commodities analyst Dave Lehl said in a commentary. "If the dollar holds its ground I would look for wheat to fall further."

A trader said the downside might be limited by the prospect of index fund rebalancing at the start of the new year. Some say the rebalancing has already begun and is support for prices.

The next downside price objective for the bears is pushing and closing CBOT prices below solid technical support at the November low of US$5.07 1/2, a technical analyst said. The next upside price objective is to push and close March futures prices above solid technical resistance at last week's high of US$5.48 a bushel.

First resistance is seen at Monday's high of US$5.30 and then at US$5.37 1/2, the technical analyst said. First support lies at last week's low of US$5.14 1/4 and then at US$5.07 1/2.